Correlation Between Hennessy Focus and Hennessy Equity

Can any of the company-specific risk be diversified away by investing in both Hennessy Focus and Hennessy Equity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hennessy Focus and Hennessy Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hennessy Focus Fund and Hennessy Equity And, you can compare the effects of market volatilities on Hennessy Focus and Hennessy Equity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hennessy Focus with a short position of Hennessy Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Focus and Hennessy Equity.

Diversification Opportunities for Hennessy Focus and Hennessy Equity

0.95

Correlation Coefficient

Hennessy Focus  Hennessy Equity

Almost no diversification

The 3 months correlation between Hennessy and Hennessy is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Focus Fund and Hennessy Equity And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Equity And and Hennessy Focus is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hennessy Focus Fund are associated (or correlated) with Hennessy Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Equity And has no effect on the direction of Hennessy Focus i.e., Hennessy Focus and Hennessy Equity go up and down completely randomly.

Pair Corralation between Hennessy Focus and Hennessy Equity

Assuming the 90 days horizon Hennessy Focus Fund is expected to under-perform the Hennessy Equity. In addition to that, Hennessy Focus is 2.23 times more volatile than Hennessy Equity And. It trades about -0.3 of its total potential returns per unit of risk. Hennessy Equity And is currently generating about -0.31 per unit of volatility. If you would invest  1,429  in Hennessy Equity And on October 10, 2024 and sell it today you would lose (46.00) from holding Hennessy Equity And or give up 3.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Hennessy Focus Fund  vs.  Hennessy Equity And

Hennessy Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Focus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Hennessy Equity And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Equity And has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Hennessy Focus and Hennessy Equity

The main advantage of trading using opposite Hennessy Focus and Hennessy Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Focus position performs unexpectedly, Hennessy Equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hennessy Equity will offset losses from the drop in Hennessy Equity's long position.

The idea behind Hennessy Focus Fund and Hennessy Equity And pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.